BrownCo Partial Cash Out of Fragrancenet.com

I was very excited to hear that cash was finally being delivered to brokerage accounts for FragranceNet.com (FGNT). You’ve probably forgotten all about that transaction that went to completion this past summer, unless you also owned that stock. I had a funny feeling by the end of the summer that I wouldn’t see cash from FragranceNet.com until the holidays. The CEO was not at all responsive to my calls and he would not allow any one else answer questions about the going private transaction.
Just before Thanksgiving, FragranceNet.com delayed the cash tender to partial share holders by making everyone fill out and sign a form confirming that we wanted to be cashed out. I think this form is what is causing problems with my account at BrownCo.

This afternoon I checked my account with BrownCo and I discovered that I finally received cash for my 499 shares of FragranceNet.com. But wait, I discovered that not all the shares were cashed out. My account history indicated that:

I was confused a bit, so I called up BrownCo. It took me 5 calls to finally make it through to customer service, since I kept getting disconnected by BrownCo’s phone system.

When I finally got a representative, I explained the problem of the 124 shares not being cashed out. He indicated that they did not receive cash for those shares, so my account was not credited with cash for those shares. I told him that those were not the terms of the transaction as explained in the SEC regulatory filings. The representative indicated that he could not do anything about it. This was not at all like the response I got from Firstrade regarding Refocus Group.

I am not at all pleased. I also sent an email to BrownCo indicating that I wanted cash for all 499 shares of FragranceNet.com or I will be transferring my account to another broker. I’ll let you know what kind of response I get tomorrow. If this issue doesn’t get resolved, I think I will be sending a message to the NASD and SEC regarding this issue. I think Etrade will be loosing a lot of BrownCo customers if this is the kind of treatment individual investors get.

My guess is that not all holders of FragranceNet.com filled out and sent to BrownCo that FragranceNet.com form in November for the cash tender. BrownCo, therefore, probably only got three quarters of the cash for the reverse split shares from the transfer agent. They probably didn’t keep track of which customers sent in the forms, so they are just proportionately allocating the cash that they received from FragranceNet.com. If that is what happened, then it is completely unfair to the shareholders that jumped though all the hoops to get their shares cashed out. On top of it all, BrownCo had the nerve to charge a $25 fee for this mess. BrownCo needs to straighten this out right away and they should refund the $25 fee considering how poorly this transaction has gone so far.

Scottrade is telling me that I am getting shares in the private company, even though I had 499. Hopefully, they will get their story straight and pay me out my $0.97 per share. Anyone holding Fragrancenet have a Scottrade account?

Fidelity did to me what Scottrade did to Jesse. I had 499 shares in 4 separate accounts and Fidelity seems to have given me shares instead of cash. They did the same to me with MRIB and something similar with NCOM. Anyone else having similar problem with Fidelity? I may have to resort to requesting the certificates in each transaction, which of course precludes doing this in my retirement accounts.

Scottrade has informed me that I did not provide them the requisite paperwork in order to be cashed out. If this is so, then mea culpa, but I have never had this happen before and have many successful going private cash-outs.

As to the multiple account issue, remember that EINs are free and easily obtainable from the IRS for entities, and limited partnerships have generally $0 formation fees (at least in GA), so certain people I know have created, let say 25 accounts under 25 different LP entity names, each with going private transactions, and have been heretofore successful with this “parallel processing”, and have made several thousands dollars very quickly. There is always the risk of being “found out” somehow, but, as far as I know, this is not expressly in contravention of federal law (though quite sneaky), so the biggest risk is probably being stuck with a pile of private stock that was probably bought without much research into the underlying corporation.

Here, my experience has really only made me more confident as to going private transactions, as the FRGN private stock is holding its original value and has actually gone up a bit. I am 9 for 10, and on the 10th, my only loss is really a heck of a lot of time sweating about a few hundred dollars. I did learn a lot, and that was really the point of all this. A smart investor friend told me, a total newbie to investing, to throw in $1000 and start playing with it, and I would get $10000 in education. Totally true, as you don’t pay any attention until its your money.